Evolution of Power Market Structures and Remuneration

This document is a technical report discussing the evolution of power market structures and remuneration in the context of the energy transition towards net zero carbon technologies. It outlines the significant changes occurring in the electric power system as it adapts to meet the objectives of the Paris Agreement. The report details the acceleration of electric power technology innovation since the 1990s, highlighting the increasing competitiveness of renewable energy sources like wind and solar. It emphasizes the need for new electricity market products and remuneration schemes that incentivize essential attributes for a reliable and resilient power grid. Key building blocks for competitive power markets are presented, including maintaining wholesale energy markets based on locational marginal costs, implementing forward capacity markets, and investing in demand-side infrastructure. The report also addresses the challenges faced by electricity markets and the necessity for evolving market mechanisms to support the integration of variable renewable energy resources and ensure system stability.